USD/JPY is trading near 158.650, but the fundamental backdrop is gradually becoming less favorable for the dollar. On March 19, the Bank of Japan kept the short-term rate at around 0.75%, but clearly stated that if the current scenario holds, it will continue raising rates and reducing the degree of monetary stimulus. This confirms that policy normalization in Japan is not yet complete.

Japanā€™s domestic data also supports this view. According to official figures, headline consumer inflation in February rose by 1.3% year-on-year, the index excluding fresh food increased by 1.6%, and the index excluding fresh food and energy came in at 2.5%. This means that underlying price pressure remains notable, and the Bank of Japan still has arguments in favor of further cautious tightening.

An additional factor is the risk of intervention by the authorities. On March 16, Japanā€™s Ministry of Finance once again stated that it is ready to take decisive action against excessive volatility, while the area around 160 is still seen by the market as sensitive. Therefore, even with high US rates, the room for further growth in USD/JPY appears limited, and the baseline scenario for the current date remains a downward correction in the pair.

Trading recommendation: SELL 158.650, SL 159.150, TP 157.150